'Why People Vote for Those Who Work Against Their Best Interests'
Are there a higher set of drivers in the global economy than we commonly pay attention to? Is the election of Donald Trump really just one part of a much larger, global pattern of events that is still unfolding and will affect us for years to come? Mark Blyth, the political economist noted for predicting both Brexit and the election of Donald Trump, walks you through the disparate dynamics in both the U.S. and Europe that will forever alter politics as usual and send shockwaves through the global economy. Dr. Blyth also tells you what this shift of power means to financial markets, the fate of the EU, and the political and economic climate in the U.S. His straight-talking, no-holds-barred and frequently entertaining analysis tells it like it is, with powerful predictions of what’s to come.
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[00:00:00.633](gentle instrumental music)
[00:00:07.974]VOICEOVER: Today, you
are part of an important
our shared future.
[00:00:12.145]The E.N. Thompson
Forum on World Issues
[00:00:14.914]explores a diversity
[00:00:16.950]on international and
public policy issues
[00:00:19.519]to promote understanding,
[00:00:21.921]debate across the University,
and the state of Nebraska.
[00:00:25.892]Since its inception,
in 1988, hundreds of
[00:00:29.229]distinguished speakers have
challenged, and inspired us,
[00:00:32.899]making this forum
one of the preeminent
[00:00:36.069]speaker series in
[00:00:40.106]It all started when
E.N. "Jack" Thompson
[00:00:43.510]imagined a forum
on global issues
[00:00:45.678]that would increase
[00:00:48.148]of cultures, and events
from around the world.
[00:00:51.418]Jack's perspective was
influenced by his travels,
[00:00:54.587]his role in helping to
found the United Nations,
[00:00:57.257]and his work at the
Carnegie Endowment for
[00:01:02.462]As President of the Cooper
Foundation in Lincoln,
[00:01:05.665]Jack pledged substantial
funding to the forum.
[00:01:08.968]And the University
of Nebraska, and Lied
[00:01:11.704]Center for Performing
Arts agreed to co-sponsor.
[00:01:15.241]Later, Jack and his
wife, Katie, created
[00:01:17.844]the Thompson Family Fund,
to support the forum
[00:01:21.047]and all their programs.
[00:01:23.249]Today, major support
is provided by
[00:01:26.519]the Cooper Foundation, Lied
Center for Performing Arts,
[00:01:30.356]and University of
[00:01:33.493]We hope these talks
sparks an exciting
[00:01:35.895]conversation among you.
[00:01:37.730](upbeat instrumental music)
[00:01:40.300]And now, on with the show.
[00:01:51.044]MIKE ZELLANY: Good evening,
ladies and gentlemen.
[00:01:52.545]I'm Mike Zellany
with the University
[00:01:54.380]and it's my honor to welcome you
[00:01:55.715]to a new season of the
E.N. Thompson forum
[00:01:57.917]on world issues, for
nearly three decades
[00:02:00.086]the University and
the Cooper Foundation
[00:02:01.688]have partnered with the
Lied Center for Performing
[00:02:03.556]Arts to make this
[00:02:05.792]Tonight our speaker is an
[00:02:07.727]author, professor, and
expert on global politics
[00:02:10.763]and economics, Dr. Mark
Blyth currently serves
[00:02:14.033]as Eastman Professor
of Political Economy
[00:02:16.569]at Brown University,
[00:02:18.671]focuses on the
causes of stability
[00:02:20.373]and change in the
economy and why
to believe certain
[00:02:24.711]economic ideas despite
evidence to the contrary.
[00:02:28.715]Professor Blyth earned
a Ph.D. in political
[00:02:30.350]science from Columbia University
[00:02:32.318]and the common theme of
his research has been
[00:02:34.354]how macroeconomic knowledge
is used in politics.
[00:02:37.724]Dr. Blyth's internationally
[00:02:40.560]have been translated
into 14 languages.
[00:02:42.662]They include The
Future of the Euro,
[00:02:44.964]Austerity: The History
of a Dangerous Idea,
[00:02:47.967]and Great Transformations:
[00:02:50.503]and Institutional Change
in the 20th Century.
[00:02:53.706]Dr. Blyth is a regular
contributor to the
[00:02:55.275]journal of the Council
of Foreign Relations,
[00:02:58.144]Foreign Affairs, and
the Guardian newspapers.
[00:03:00.980]He's appeared multiple
times on NPR, BBC,
[00:03:02.615]and Bloomberg. Tonight
after his remarks,
[00:03:06.586]you will have the
opportunity to ask Mark
[00:03:08.221]questions via Twitter
using the hashtag
[00:03:09.923]E.N. Thompson forum, also
ushers will be in the aisles
[00:03:14.360]to collect your
[00:03:15.662]and bring them to the stage.
The title of tonight's
[00:03:18.131]presentation is Why
People Vote for Those
[00:03:21.134]Who Work Against
Their Best Interests,
[00:03:23.503]please join me in a warm
Thompson Forum welcome
[00:03:25.371]for Mark Blyth.
[00:03:31.844]MARK BLYTH: Thank you.
[00:03:40.320]Wow, can you hear me, everyone?
[00:03:43.890]Can you hear me,
yes, you hear me?
[00:03:45.992]Alright good, because
I can't see you,
[00:03:47.527]I can't see a damned thing.
[00:03:50.463]Wow there's a lot of people
here, is Netflix broken?
[00:03:53.933]I mean really, I mean
what is it, a Tuesday?
[00:03:56.836]Thank you, thanks for
coming, it's brilliant.
[00:03:58.972]Alright, I can't see you
which is very disconcerting
[00:04:01.274]but I suppose it's
good in some ways.
[00:04:04.143]Let's get started, first of all,
[00:04:05.878]I'm Scottish, so you
might have a problem
[00:04:09.716]with the way I sound,
for those of you
[00:04:12.085]who are going why does
that guy sound funny,
[00:04:14.387]let me explain this, have
you ever seen the film
[00:04:16.022]Shrek, right, so after 27
years in the United States
[00:04:20.593]I have exactly the
same voice as Shrek.
[00:04:23.596]I will prove this
to you now, Donkey!
[00:04:28.134]So, if at any point
you're sort of fiddling
[00:04:30.203]out going what's that
guy talking about,
[00:04:31.938]just think Shrek and it
will all come back in,
[00:04:34.941]alright, second thing is
I have a bit of a cough,
[00:04:37.443]so if I basically
go down and cough up
[00:04:39.278]a lung halfway through,
it's normal, I'll be fine,
[00:04:41.481]and then the third
one is the title,
[00:04:44.050]I didn't actually
make this title up,
[00:04:46.586]the Thompson Forum did,
so when I was putting
[00:04:49.288]the slides together,
I went to the website
[00:04:51.290]and said, oh, I didn't
give them a title,
[00:04:53.793]I wonder what, and I
saw this and I thought,
[00:04:55.528]ooh, I'm in trouble, see
cause to get things started,
[00:04:58.665]I actually don't
believe that's true.
[00:05:02.568]So let me explain
what I mean by that,
[00:05:04.704]I think it's
[00:05:06.372]for anyone to tell someone
else what they think
[00:05:08.007]should be in their
interest, so it's very
[00:05:11.244]easy particularly for
elites, however that word
[00:05:14.514]is used and abused to
say well it's in the best
[00:05:17.216]interest of people
to do this, or people
[00:05:19.152]vote against their
interest, that's like,
[00:05:21.120]really, maybe they just
see the world in a very
[00:05:23.623]different way from you,
maybe you don't like
[00:05:25.258]the way they see the
world, but they're
[00:05:27.393]entitled to see
the world that way,
[00:05:29.962]and they will act
upon it and the moment
[00:05:31.597]you tell them they
shouldn't do this,
gonna tell you, no,
[00:05:35.334]that's what I'm gonna
do, so I'm gonna use
[00:05:37.336]the title as a
provocation today and feed
[00:05:40.306]into this and see
where we go with it.
[00:05:41.607]So you ready to play,
alright let's go.
[00:05:44.777]Let's see if I can
figure out this,
[00:05:45.878]looks like one of the,
remember Star Trek,
[00:05:48.981]it's like, I think this
thing will come on,
[00:05:53.519]yay there we go, alright,
here's the thing,
[00:05:56.322]so you may or may
not know, I got Trump
[00:05:59.192]six months out and I
got Brexit three months
[00:06:01.327]before that, because
I pay attention
[00:06:03.396]to what's called
[00:06:05.865]boring title, I'll
be there in a minute,
[00:06:07.567]here's the thing, President
Trump is a local event
[00:06:10.269]and he's part of a global trend.
[00:06:11.838]Brexit's the same thing,
the German elections
[00:06:14.006]just happened and
reconfirmed the trend
[00:06:15.908]despite the fact that
the French National Front
[00:06:17.844]didn't get elected, this has
been 30 years in the making.
everybody has a version
[00:06:23.082]of this, whether it's the
guy in the Philippines
[00:06:25.218]that likes killing
people that are on drugs,
[00:06:27.386]whether it's the
Japanese Prime Minister
[00:06:29.522]who likes provoking
things with Japan,
[00:06:31.457]whether it's Trump telling
us that NAFTA's dead
[00:06:33.993]and tweeting various
Sturgeon in Scotland,
[00:06:37.663]saying she wants
independence, she doesn't
[00:06:39.532]want independence, she
does want independence,
[00:06:41.367]right, the Catalans in
Spain could be up there,
[00:06:43.302]right, this is kicking
[00:06:45.671]In fact here's a little
picture of some of the
[00:06:47.140]most notable ones
left and right.
[00:06:49.142]Oddly the left wing
ones are on the right,
[00:06:51.711]the right wing ones
are on the left
[00:06:52.912]but bear with me,
but as you can see
[00:06:55.081]and this is very
important, there's a huge
[00:06:57.016]left wing phenomenon here,
Jeremy Corbyn, Nichola,
[00:06:59.385]we've got Dalinka, you
have the Italian version
[00:07:03.055]up there, Spain, and then
Alex Tsipras in Greece,
[00:07:05.358]as well as the more well
known ones on the right,
[00:07:08.795]cause we tend to think
of populism as populism,
[00:07:12.565]and that is totally
partial, if you go
[00:07:16.202]to Europe, three major
country party systems,
[00:07:19.038]all the political parties
have been completely
[00:07:21.440]transformed in the
past ten years.
[00:07:23.242]The Italians, the
Greeks and the Spanish.
[00:07:25.845]They will never
be the same again,
[00:07:26.979]and it's insurgents from
the left rather than
[00:07:29.182]the right that's actually
transformed these places
[00:07:31.284]and there's a left-wing
version of this one
[00:07:33.052]and there's a right-wing
version of this
[00:07:35.121]so I want to go through both.
[00:07:36.956]Short version of
how we got here.
[00:07:38.457]Apparently if I walk
this far I disappear
[00:07:40.393]is that true?
I have stand here
[00:07:48.568]There's a particular
episode of Star Trek
Picard was tortured.
[00:07:53.906]It's like this,
like that, anyway
[00:07:56.542]short version of
how we got here.
[00:07:59.145]Apparently they didn't tell you
[00:08:00.213]I used to do stand up
[00:08:01.180]and occasionally I
just diverge into it.
[00:08:02.849]So there we go.
[00:08:05.718]So back in the day,
[00:08:06.853]at the end of World War II,
[00:08:07.854]from World War II,
[00:08:08.855]from '45 to about '75
[00:08:11.090]this is the golden era
[00:08:13.092]and it was the period when
something very weird happened.
[00:08:15.628]It never happened before.
[00:08:16.929]The top of the income
distribution came down
[00:08:19.031]the bottom went up
[00:08:20.666]and the whole
[00:08:22.568]This is when you
got the birth of
[00:08:23.769]the American middle classes.
[00:08:25.204]This is when British Prime
Minister Harold Wilson
[00:08:27.273]said to the
working people in Britain,
[00:08:30.276]you've never had it so good
[00:08:31.677]and he was right.
[00:08:32.712]And it was a unique
combination of circumstances
[00:08:33.712]that produced that world.
[00:08:35.147]Mainly the reaction to
the Great Depression,
[00:08:36.948]fascism, World War II
[00:08:38.417]and the success of
the Soviet Union
[00:08:40.753]and appealing as an
alternate of economic model
[00:08:41.754]after the chaos of
the 20's and 30's.
[00:08:45.458]So the end of that period
[00:08:46.559]we built a world that
looked like this.
[00:08:47.860]The Cold War Era.
[00:08:49.729]The policy target
was full employment.
[00:08:51.530]Regardless of whether
you were Sweden or Spain
[00:08:54.100]or the United States
[00:08:55.134]that's what the
government cared about
[00:08:56.168]because we saw the
[00:08:58.337]of mass unemployment on
a decade long period.
what that meant
[00:09:03.643]was that capital was sealed off.
[00:09:05.745]There was no international
banking running around.
[00:09:08.447]There was no derivative
trades. There's no mortgage
There was silo banking.
savings and loans,
[00:09:15.488]investment banks, they
all did discrete things
[00:09:17.723]and it was all about
forcing investment at home.
[00:09:20.760]You had highly distracted
[00:09:22.862]You had big organized labor
dealing with big business
[00:09:25.798]in big production units.
[00:09:28.034]You had cost of living
[00:09:30.303]All of that made possible,
a high rate of investment
[00:09:32.538]which led to a
high rate of growth
[00:09:34.407]which led to high rates
of taxes and transfers.
[00:09:37.076]Crucial bit of information.
No one knew the name
[00:09:39.912]of the person who
ran the central bank.
[00:09:44.283]Now jump forward to the
era that I grew up in.
[00:09:46.986]I left Britain in 1991
because of a woman.
[00:09:54.660]and I jumped straight into
the arms of Bill Clinton.
[00:09:57.163]I don't think it was
actually such a good idea.
[00:10:01.334]we went to the neo liberal
era and what did that mean?
[00:10:03.369]We built a regime that
was entirely different.
[00:10:05.204]All these different economies,
they're all very different
[00:10:07.373]from each other, but they no
longer cared about unemployment
[00:10:09.909]because it had this
[00:10:13.179]we'll get back to
that in a minute.
[00:10:14.380]What did we care about now?
[00:10:16.916]And what do you care about?
[00:10:17.917]Globalization. And what does
globalization allow you to do?
[00:10:20.720]Well you make stuff really
cheaply. Well, yes 'cause
[00:10:22.555]you have globalized
your labor markets.
[00:10:24.690]So the ability of
labor to go on strike,
[00:10:26.325]demand higher wages,
done. It's over with.
[00:10:29.295]Open financial markets. Why?
[00:10:31.530]Because capital and
technology flowing abroad
[00:10:33.566]create those global
[00:10:37.536]So the only way you
can cope at home
[00:10:39.038]is get out of the unions
and be more flexible.
[00:10:41.674]We're a flexible labor market
[00:10:43.075]and you got much lower
taxes, much lower transfers
[00:10:45.778]and here's the weird thing.
[00:10:47.213]Everybody knows the name
of the person who runs
[00:10:49.048]the central bank.
[00:10:50.916]Because they're now the
most important person
[00:10:52.318]in the country.
regimes. Watch this.
[00:10:56.122]That's US corporate profits
going from 1960 down to 1992
[00:11:02.094]and back up. Look at that.
[00:11:03.863]I wonder what was squeezing
them and what made them boom?
[00:11:07.433]Here's another one.
[00:11:09.001]US inflation. All the way
up in the 1970's. Boom.
[00:11:13.572]In 1980, Volcker jacks
up interest rates.
[00:11:16.609]The long decline in inflation.
[00:11:19.045]And then what do you
see treasury yields
[00:11:21.247]a proxy for interest rates.
[00:11:23.516]Up and up and up and up.
Coping with inflation
[00:11:25.618]and then down and down and
down to where they are today.
[00:11:29.889]Oops, back up. There we go.
[00:11:31.624]So what killed that first
regime was inflation.
[00:11:34.060]Nixon vows inflation cut.
There's the winter of discontent
[00:11:37.029]and Britain with the
unions were striking
[00:11:39.398]and no one was even
[00:11:42.101]That was a tabloid story.
What actually happened was
[00:11:43.936]the ground was frozen so
you couldn't bury anyone
[00:11:46.005]but you could always
blame the unions.
[00:11:47.673]That's actually what happened.
[00:11:49.175]And then as Ron
Chernow claimed there
[00:11:52.812]the great inflation destroyed
faith in paper assets
[00:11:55.214]'cause if you held the bond,
suddenly the bond was worth
[00:11:56.882]much less money
than it was before.
[00:11:58.784]But it was a brilliant
time to be a debtor.
[00:12:01.053]How many of you took out
a mortgage in the 1970's?
[00:12:04.790]Come on, put your hand up.
You made out like bandits.
[00:12:06.959]Because if you had a 3%
mortgage and a 10% inflation,
[00:12:10.362]it's great the bank was
eating it and you were getting
[00:12:12.631]the capital gain and then
when you elected Reagan
[00:12:15.167]you locked in higher
interest rates and your house
[00:12:17.803]increased value. What deal?
[00:12:21.907]When it failed in the 70's
[00:12:24.610]and the reason it failed
was the following.
[00:12:27.279]There was a system reset.
Now here's the failure.
[00:12:29.482]Imagine you've decided
that I'm gonna target
[00:12:31.550]full employment. And that's
gonna be my one policy goal.
[00:12:35.187]So you're gonna run a very
tight restricted little set
[00:12:38.023]of labor markets. And
wages are gonna get bid up
[00:12:40.159]to the point that by the
time you get to the late 60's
[00:12:43.028]when you're running the
Vietnam War off the books
[00:12:44.997]your real unemployment
rate's about two and a half
[00:12:47.800]to three percent. So,
what happens in that point
[00:12:51.103]is that the worst guy in
your firm can leave work
[00:12:54.106]and then walk straight
into another job
[00:12:55.875]and get a pay raise. The
only way that firms can deal
[00:12:59.345]with this is by
pushing up prices.
[00:13:01.347]So they push up prices
then what happens?
[00:13:03.215]Labor figures out they
haven't really had a pay raise
[00:13:05.618]so they want more money,
so they get a pay raise
[00:13:07.686]so they want more money,
[00:13:08.721]and it all gets pushed
up into inflation.
[00:13:10.489]When inflation goes up
and up and up like this
[00:13:12.424]guess what happens?
[00:13:13.826]It becomes irrational
to be an investor.
[00:13:16.228]So the investment
[00:13:17.963]Unemployment goes up
despite the inflation.
[00:13:20.566]We get the great
stag-flation of the 1970's.
[00:13:23.402]And what's the solution
[00:13:25.604]Hand policy to central bankers.
[00:13:27.506]'Cause they're not elected
[00:13:28.908]they can't be
thrown out of office
[00:13:30.176]and they can do the nasty.
[00:13:32.044]They can jack up
interest rates to 20%
[00:13:34.180]when your inflation is 16%
[00:13:36.015]cause a massive
hemorrhaging of the economy,
[00:13:38.250]construction of credit
[00:13:39.785]and you get the big
recessions that happened
[00:13:41.420]in the early 1980's.
[00:13:43.189]But it really reset the system.
[00:13:45.324]'Cause there was a new software
written onto that hardware
[00:13:47.693]if you want to use that analogy
[00:13:49.161]and that was the ideas
of Thatcher and Reagan
[00:13:51.730]and the people behind them.
[00:13:52.998]The open markets price
stability, going global,
[00:13:56.068]that was the way you do it.
[00:13:57.770]The flexibility was
good, the labor was bad.
[00:14:00.072]That the returns to
capital had to go up
[00:14:02.007]otherwise what's the point
in running capitalism?
[00:14:04.276]That was the neo
[00:14:07.680]Now, in 2008 that
regime blew up.
[00:14:10.115]And if you have a look at
this slide what it shows you
[00:14:12.818]is percentage of
GDP as bank assets
[00:14:15.854]in a selection of countries.
[00:14:17.756]So let's have a look at Iceland.
[00:14:19.692]Well that's good. That's about
800% of GDP in bank assets.
[00:14:24.830]Let's remember what
a bank asset is folk.
[00:14:27.399]Banks call these things assets
normal people call them debt.
[00:14:33.572]So I'll sit and explain
this one, right?
[00:14:35.641]So I have a condo in
Boston which is nice.
[00:14:38.010]And I have a mortgage on
the other end of that.
[00:14:40.512]Now the condo is my asset
and it's the bank's liability
[00:14:44.116]'cause they don't want a condo.
They want the money. Right?
[00:14:47.953]Now on the other end
of that trade is a bank
[00:14:50.022]and the bank looks
at it and says
[00:14:51.290]I have an asset. It's
called Mark Blyth.
[00:14:53.926]And I'm like wow,
you've chosen poorly.
[00:14:56.161]But nonetheless, I
really am their asset
[00:14:58.030]it's not the condo. They
care about the income stream
[00:15:00.065]and assets and
liabilities sum to zero.
[00:15:03.068]So if you've got a bank
that has in this case
[00:15:06.272]623% of the economy's total
value out there in loans
[00:15:12.111]do you think that might
be slightly risky?
[00:15:16.148]And everybody was at that.
[00:15:17.783]Even those conservative Germans.
[00:15:19.752]86% of German GDP in one
bank called Deutsche Bank
[00:15:24.290]which lent an average
[00:15:27.593]Assets to liability of 60 to
one on an average Tuesday.
[00:15:31.730]That's stable. All
right, that's great.
[00:15:34.300]Now why did we get like this?
[00:15:35.668]'Cause remember that inflation
rate that's very high?
[00:15:38.304]You kill it with high
rate interest rates.
[00:15:39.838]But then you've got
a problem because
[00:15:41.507]you liberalize finance
when the 16, 15% interest.
[00:15:44.977]Oh my god it's so
easy to make money.
[00:15:48.147]I mean I get 15% just for
showing up at Citi Bank
[00:15:51.317]and opening a check account?
[00:15:52.584]That's incredible. But
a bonanza for savers.
[00:15:55.120]This is awesome.
[00:15:56.622]So anybody can do this.
Remember Wall Street the movie?
[00:16:01.460]Now here's the problem.
[00:16:02.661]Those interest rates
go down over time
[00:16:04.463]'cause you make more and
more financial transactions,
[00:16:06.965]you integrate different
markets, you open up globally
[00:16:09.568]so the pool of
money gets bigger.
[00:16:12.071]As the pool of money gets
bigger, what happens to the
[00:16:13.806]price of money? It falls.
[00:16:16.041]What's the price of
money? The interest rate.
[00:16:18.677]So how do you make money
on a declining spread?
[00:16:21.080]You pump up the leverage.
[00:16:24.216]You do this.
[00:16:25.651]And the banking system of
the west became multiples
[00:16:28.587]of the size of the
[00:16:31.023]And it was all working
great so long as everyone
[00:16:32.991]was revolving credit. Whether
it was your credit card,
[00:16:36.261]your house, your mortgage
loan, your car loan book,
[00:16:38.664]whatever it was. So long
as it doesn't go bust.
[00:16:41.967]But remember, we've
abolished the business cycle.
[00:16:45.037]Everything's fine. We
know what we're doing.
[00:16:49.108]Then it all blew up. And
at that point in time,
[00:16:51.810]remember how I said the
central bankers run the world?
[00:16:54.046]Here's why. They
bailed the system.
[00:16:57.116]In the 1970's the system
failed. Had a heart attack
[00:17:00.052]because of inflation. The
neo liberals came along
[00:17:02.554]and reset the system.
They wrote new software
[00:17:04.490]for the hardware.
[00:17:06.125]We didn't do that in 2008.
We let the money doctors
[00:17:08.627]come in and what they
did was they pumped
[00:17:10.462]13 trillion of euros,
dollars and yen into the
[00:17:14.199]global banking system to
keep the system going.
[00:17:17.603]It had a heart attack and
we basically put them in
[00:17:19.738]intensive care for 10 years.
[00:17:21.573]This is the Federal
Reserve's balance sheet.
[00:17:24.209]That's all assets that
they have bought from the
[00:17:26.211]private sector and
swapped it out for money
[00:17:28.380]so that the private
sector super cheap loans.
[00:17:31.216]You know what they do with that?
[00:17:32.684]Apple sits on the largest
pile of cash of any corporate
[00:17:35.421]in the world. I think it's
about a quarter of a trillion
[00:17:39.291]Rather than using that,
they borrowed money
[00:17:41.794]'cause it was so cheap,
issued their own bonds
[00:17:44.430]which earns them a
premium on top of that,
[00:17:46.932]took the cash from that
and then bought their own
[00:17:49.168]shares back to boost
the value of their stock
[00:17:51.737]so they could reward
themselves even more money.
[00:17:55.073]And we book that as investment
so they don't pay any taxes.
[00:17:58.510]Does anyone else wanna
call that bulls**t?
[00:18:04.416]The euro system is no different.
[00:18:06.051]In fact they're in much deeper.
[00:18:08.320]So, let's bring all
this back to populism.
[00:18:10.522]Do you think there
might be a connection?
[00:18:12.991]Let's figure this out.
[00:18:14.726]So you can't really see this
because I made it all up.
[00:18:17.396]No, you can't really see
this because it's very small
[00:18:18.831]unfortunately. But let me try
and explain what's up here.
[00:18:21.900]Percent price changes in
consumer goods and services
[00:18:25.070]in the US from '97 to 2017.
[00:18:27.806]So over a 20 year period,
right, what costs more?
[00:18:31.743]You know what's at
the top of that?
[00:18:35.414]You know what the next one is?
[00:18:38.016]You know what the next one is?
[00:18:40.819]You know what's at the bottom?
[00:18:44.723]You can't eat an iPod and
if you can't afford to
[00:18:46.725]go to college, what are
you gonna do apart from
[00:18:48.594]sit at home and
play games with it?
[00:18:52.731]Here's the global
story on incomes.
[00:18:54.433]This is called the elephant
graph for obvious reasons.
[00:18:57.236]So what it shows here is
the real increase in incomes
[00:19:01.373]from the poorest person
in the world, literally
[00:19:04.309]to the richest.
[00:19:05.577]And if you do this by country,
[00:19:07.446]what those dots represent
are different countries
[00:19:09.448]is you see that basically
the countries of eastern
[00:19:11.817]South Asia have had
the largest gains.
[00:19:14.219]If you go up to the 45th
percentile, that's China.
[00:19:16.822]They've been doing
quite well. Why?
[00:19:18.657]'Cause they came from
here, we were there
[00:19:19.825]and it's went like that.
[00:19:21.793]Now, when you get to
the 67th percentile
[00:19:24.229]you get to the poorest
person in the United States,
[00:19:26.565]notice all those incomes
have been falling relative
[00:19:29.668]to where they've been growing.
[00:19:31.303]In fact at the bottom
of the distribution
[00:19:33.572]at 78% to 87%, the
American Middle Classes,
[00:19:38.043]you've taken a real hit.
[00:19:40.245]And then guess what? There's
been fantastic gains.
[00:19:42.915]That's your 1% in the trunk.
[00:19:47.252]Now who gets this if you
break out for the US?
[00:19:49.721]This is quintiles, 20%,
40%, 60%. Guess what?
[00:19:54.126]The top 20% have made
off with all the cash.
[00:19:57.796]And then everybody
else's went uhhhhh
[00:20:00.265]and if you're actually
in the bottom uhhhhh.
[00:20:02.601]Look it's hardly
budged since 1980.
[00:20:05.137]And that's true for the
bottom three quintiles.
[00:20:07.873]So 60% of the country hasn't
really had a pay raise
[00:20:11.243]when you adjust for
inflation since 1980.
[00:20:14.780]Meanwhile like me on
the coasts, we've been
[00:20:17.182]lapping it up. I've been
having lobster thermidor
[00:20:19.318]in the bath.
[00:20:22.187]Don't tell my wife. She
hates when I do that.
[00:20:24.156]Here's a clue to
where this broke.
[00:20:27.292]Remember that first regime
I was talking about?
[00:20:30.896]Full employment, captive
labor markets, blah blah blah
[00:20:33.799]the rest of it. Look,
what have you got?
[00:20:35.434]1948 right through 1973.
Productivity and hourly
each other completely.
[00:20:41.473]Kohler contracts. Labor's
big enough to hurt business
[00:20:44.810]business big enough
to hurt labor.
[00:20:47.613]Because you have to
constantly pay labor more,
[00:20:49.748]business is forced to innovate.
[00:20:51.984]That's how you
maintain your margins.
[00:20:53.785]Until the system self
destructs with inflation
[00:20:55.954]'cause no amount of innovation
is gonna get you around that.
[00:20:58.724]It's a structural
problem. So you go for the
[00:21:00.626]disinflation solution. You
start to globalize your
[00:21:02.828]production, you build in
the industrialization that's
[00:21:05.197]been going on from the 70's the
move from here to the south,
[00:21:08.200]what do you find?
starts to lag.
[00:21:12.904]What's in the gap?
[00:21:14.039]That's your one percent trunk.
[00:21:18.310]Here's the quintile wage
growth. Again the 20%'s
[00:21:21.346]the wage quintile.
What's actually changed?
[00:21:23.281]Hourly wages. Who's
been making out?
[00:21:25.384]Again the top and
the upper middle.
[00:21:27.285]The middle's barely
budged. The bottom two,
[00:21:29.187]you can't even talk about,
the bottom has fallen
[00:21:31.423]in real terms.
[00:21:34.292]Labor share of income.
[00:21:36.261]Used to be in the 70's
we never had it so good.
[00:21:39.498]That's because capital
share of income was low
[00:21:41.767]and labor share of income
was at an all time high.
[00:21:44.202]Since then, look
[00:21:46.038]Down and down and down.
[00:21:48.473]Now this creates a big
problem at the end of the day
[00:21:50.575]because I like Mitt Romney
but there's only so many
[00:21:52.644]fridges he can buy.
[00:21:55.747]And you do have a basic
[00:21:57.382]if you've been running
your economy as we have
[00:21:59.217]for the past 30
years off of credit.
[00:22:01.486]And if people's
wages aren't rising
[00:22:03.689]and they're strapped
with too much debt
[00:22:05.924]which banks call credit,
remember that little trick?
[00:22:08.326]Assets and liabilities.
Then they can't service
[00:22:11.329]their debt. If at the same
time they're being told
[00:22:12.964]if you don't go to college,
you'll never amount to anything.
[00:22:15.400]There's no jobs for anyone who
doesn't have a college degree
[00:22:18.336]I wish I knew what a college
degree qualified most people
[00:22:19.871]would do by the way but
we'll put that to the side
[00:22:21.506]for the moment.
[00:22:22.874]What is it you end up with?
[00:22:24.443]You end up with a world
in which your share
[00:22:26.278]of the national product is
falling despite the fact
[00:22:29.147]that the country has
never been richer.
[00:22:31.616]And it's not just this country.
[00:22:33.051]It's every country. I'm
gonna take you to Germany
[00:22:34.786]at the end of this and show
you the story's just the same.
[00:22:39.157]This is the zip
code distress map.
[00:22:42.127]What you see there are the blue
areas on the left hand side
[00:22:45.063]are prosperous communities.
The orange are at risk.
[00:22:49.201]The red one are distressed.
[00:22:51.670]obesity, murder rate, opioid
addiction. All of the bads
[00:22:55.907]are the red bits.
[00:22:57.943]There's the electoral map.
[00:23:01.279]It's not a perfect fit
because one's zip codes
[00:23:03.148]and the other one are districts.
[00:23:05.083]But it does tell you a
story. It might suggest
[00:23:07.486]that people who are living
in distressed communities
[00:23:10.822]don't actually think when
politicians show up and say
[00:23:13.525]vote for me jobs,
vote for me change
[00:23:16.261]and their community just
stagnates and gets worse
[00:23:18.730]that they don't actually
update the information
[00:23:20.966]and maybe figure that
these people are just
[00:23:24.636]And then when someone comes
along and calls bulls**t on them
[00:23:26.972]they go, I may not like this guy
[00:23:28.774]but he's telling the truth.
[00:23:33.445]So how did people survive
when wages isn't growing?
[00:23:38.316]This little graph
shows you bank assets,
[00:23:40.552]your liabilities, your
debts, their income,
[00:23:44.389]since 1970. Bank
loans to GDP. Boom.
[00:23:48.426]Off the scale.
[00:23:51.363]Now, this is my favorite
advert from the lunacy
[00:23:53.665]that was the early
2000's. Citi Bank had an
[00:23:56.935]advertising campaign. Cost
them 100 million dollars.
[00:24:00.505]They spent that on advertising.
And they're a crap bank.
[00:24:06.812]And they are a crap
bank but anyway.
[00:24:09.114]They had this whole
[00:24:10.515]This is an example of it. Open
a cravings account, right?
[00:24:13.819]This is from 2005
just before the bust.
[00:24:16.354]Do you remember what the
advertising slogan for
[00:24:19.524]the whole campaign was?
[00:24:20.625]Five bucks to anybody
who knows this.
[00:24:25.397]Remember this. Right.
[00:24:26.932]Not save up and buy
yourself something nice or
[00:24:29.000]you might want to
put something away
[00:24:31.069]and use the power of
[00:24:32.971]No. Just live richly.
[00:24:34.673]How can we do that? In
2004 I lived in Baltimore.
[00:24:37.876]I went away for two weeks.
I couldn't open the door
[00:24:40.212]when I came home 'cause I had
so many credit card offers.
[00:24:44.816]Out of control.
[00:24:48.220]Now, that's where this
goes. Remember that thing
[00:24:50.055]about labors shares declining?
[00:24:51.890]All the incomes go to top
20%. This is euro area
[00:24:55.260]consumer credit. There's
US consumer credit.
[00:24:59.664]Look at the jump.
[00:25:01.833]That's people borrowing
to fill in that gap.
[00:25:04.536]That's why the banking's so big.
[00:25:06.905]Because every single one
of us is running a deficit.
[00:25:09.507]I'm 50 years old. For
everybody who's 50 years old
[00:25:12.344]or older, do you remember
a time when you didn't have
[00:25:18.183]For everybody who's
under 50, that happened.
[00:25:23.321]We used to have this thing
[00:25:24.356]called the state that
run deficits for us
[00:25:26.491]and paid for stuff.
[00:25:28.627]But now you do it yourself
through student loans,
lines of credit,
[00:25:34.099]through borrowing from
your houses if it's an ATM.
[00:25:37.535]Because that's what you're
using to fill in the gap.
[00:25:39.571]'Cause the cost of
college has gone up 150%
[00:25:41.539]in real terms. Whereas
your wages if you're in the
[00:25:44.142]middle of the distribution
have barely budged.
[00:25:49.581]This is euro area
wage growth 2008 - 2017.
[00:25:53.118]Even the Europeans in their
bigger wealthy estates
[00:25:55.253]same trend. And there's the
wage share of GDP again.
[00:25:59.224]Same as we saw before.
Labor share falling off.
[00:26:02.994]So what happens when
[00:26:03.828]you bail out that
massively levered system
[00:26:06.464]in 2008? When regime
two has the heart attack
[00:26:10.502]and the money doctors come in.
[00:26:13.004]This is where all
the debt came from.
[00:26:15.340]It wasn't that we went
on an orgy of spending.
[00:26:17.976]That's where I got pissed
off enough to write that book
[00:26:19.844]Austerity: The History
of a Dangerous Idea.
[00:26:21.513]This was the greatest
bait and switch
[00:26:23.481]in human history folks.
[00:26:25.483]What actually happened
was the banking sectors of
[00:26:27.285]all the advanced
countries blew up.
[00:26:29.788]And rather than them
taking their losses,
[00:26:31.256]they told the
politicians oh my god,
[00:26:33.558]there'll be no
money in the ATM's.
[00:26:34.893]Think what will happen.
The whole world will die.
[00:26:36.928]Maybe it's true, maybe it's
not but like all good stories
[00:26:39.497]it makes you afraid.
So what do you do?
[00:26:41.833]You open up the monetary tops
and you bail all them out.
[00:26:45.003]And you run large deficits
which lead to more debt.
[00:26:48.106]You recapitalize the
[00:26:50.008]You do all the
stuff that produces
[00:26:52.043]and the amount gets a
giant raise in the amount
[00:26:55.547]of federal debt and
the same in the EU
[00:26:58.383]despite the fact that
they're not even one country.
[00:27:00.952]All the buying of those assets,
[00:27:02.220]putting on the balance sheet,
[00:27:03.455]handing them the cash,
they then issue the bonds,
[00:27:05.423]buy back their own share price
[00:27:06.925]and we still don't
have a pay raise.
[00:27:08.827]It's called financial
[00:27:12.297]13 trillion dollars in central
bank interventions later.
[00:27:14.866]Here's the funny thing.
There's no inflation.
[00:27:17.502]See the start of the
crisis, the one big fear was
[00:27:20.572]if the government steps in and
starts spending all this money
[00:27:23.875]it'll be like Germany
in the 1920's.
[00:27:26.211]There'll be this huge
hyperinflation and it will be
[00:27:28.380]terrible and inflation's
been falling and falling
[00:27:31.950]and falling and falling.
[00:27:36.021]Here's why. Remember I
mentioned the 1970's was
[00:27:38.023]very important. It was that
moment when the inflationary
[00:27:40.759]crisis took hold and
broke the post-war model
[00:27:45.663]Ooooooo. Did we get that wrong.
[00:27:48.833]Here's my favorite graph
in the world. You ready?
[00:27:51.102]'Cause I've got a few
but this one's a topper.
[00:27:58.410]I got this from a guy who
smuggled it out of the
[00:28:00.512]cabinet office of the
Japanese Prime Minister.
[00:28:03.081]It was fantastic, right?
[00:28:04.649]That's why it's all in Japanese.
[00:28:06.051]But what does it show you?
[00:28:08.086]It shows you interest
rates since 1350.
[00:28:12.023]Now, when you get to, I
know it's brilliant right?
[00:28:14.059]When you get to the, stay
with me, pay attention.
[00:28:20.131]I know it's fun but
it's worth it. Now look.
[00:28:22.200]Here's the thing. You all
watch Game of Thrones, right?
[00:28:25.036]So Game of Thrones. Hi
I'm the king I'd like to
[00:28:27.572]borrow some money. I'm
the bank of Braavos.
[00:28:30.208]You know what happened?
So, in that world,
[00:28:33.878]you have very high
real interest rates
[00:28:36.014]because if you get a
bond from a government
[00:28:37.849]they might rip you off.
[00:28:39.651]There's no secondary market
where you buy and swap
[00:28:41.719]different bonds around
to offset the risk.
[00:28:44.889]So you have very high
real interest rates.
[00:28:46.791]The Italians and the Dutch
come along in the 15th, 16th
[00:28:49.260]century and invent a secondary
market for government debt.
[00:28:52.163]That starts to grow rapidly.
[00:28:53.832]The risk dissipates and then
by the time you get to the
[00:28:56.768]1700's, real interest rates
are below four percent.
[00:29:00.038]The Brits can issue a
perpetual bond, a forever bond
[00:29:03.074]to fight in the Napoleonic
wars at three percent
[00:29:05.076]and its oversubscribed.
[00:29:06.744]By the time you get to 1941,
the real rate of interest
[00:29:10.281]is 1.88. So the long run
real rate of interest for
[00:29:14.619]the global economy
is two percent.
[00:29:17.055]Then there's the 70's.
[00:29:19.057]All the inflation is in
the 70's 'cause of the one
[00:29:21.392]unique confluence of events
that was that post-war
[00:29:23.394]regime and its breakdown.
[00:29:25.296]But all of the economics
we've ever learned
[00:29:27.365]is based upon the experience
of that one bit of
[00:29:29.934]the time series. Every
thing else is forgotten.
[00:29:33.605]Here's why this is important.
[00:29:37.342]That's the federal funds rate.
Forget the financial crisis.
[00:29:40.311]Where's that been going?
[00:29:42.380]Down and down and down.
[00:29:44.849]Here's the four big
central banks in the world.
[00:29:47.552]Down and down and down.
crisis all the way down.
[00:29:53.892]Banks build up leverage
on the way up. Pop.
[00:29:56.861]Interest rates are still down.
[00:29:58.229]There's no inflation
in the system. Why?
[00:29:59.998]'Cause it's labor that
[00:30:02.200]And once you've globalized
your labor markets
[00:30:03.935]there's no inflation
[00:30:06.104]Why can't Johnny E. Ellen
bring interest rates up?
[00:30:08.273]Why can't Draghi
interest rates going up?
[00:30:09.841]'Cause there's no reason
to. There's no inflation.
[00:30:11.976]Why would you do it? You'd
simply slow down the economy.
[00:30:14.312]But what does that
mean for savers?
[00:30:16.014]What does that mean
for pension funds?
[00:30:21.452]Now add this all together
and in my opinion,
[00:30:23.154]and you get populism.
Debts are too high,
[00:30:26.057]wages are too low
to pay off the debt
[00:30:27.692]inflation's too low
to eat the debt.
[00:30:29.561]You can't play the
trick you did in the 70's
[00:30:30.828]when you got a mortgage.
[00:30:32.463]It's the other way around.
This is a creditor's paradise
[00:30:34.999]not a debtor's paradise.
[00:30:36.968]The left response is blame
capital and blame globalization
[00:30:41.306]and they're not blameless.
The right response
[00:30:46.077]Mmmmmmm, we can disagree
on the immigrants one
[00:30:47.946]but they're basically
hitting on the same thing.
[00:30:50.515]Now, the results of this are
creditor debtor standoffs
[00:30:54.586]gun fights if you will
[00:30:56.688]at the level of states, at
the level of localities,
[00:30:59.357]at the level of communities.
[00:31:01.159]What you have is a situation now
[00:31:02.994]where there's no inflation.
Interest rates are really low
[00:31:04.762]where your debts are stable.
[00:31:06.598]But it's very hard
to service them.
[00:31:09.100]And all the laws are being
written to the advantage
[00:31:10.635]of creditors now.
[00:31:12.070]You can't declare personal
bankruptcy on student loans,
[00:31:13.638]et cetera, et cetera.
[00:31:15.039]So what do you have? The
real value of debt goes up
[00:31:16.874]but your ability to
collect goes down.
[00:31:19.677]What does that do?
Who are the losers?
left parties of the 1990's
[00:31:25.216]the German social democrats,
new labor Clinton's version
[00:31:27.552]of the Democrats
[00:31:28.920](blowing up noise)
[00:31:30.088]credibility is gone.
[00:31:31.456]They're dead. Who are
seen as the new stars?
[00:31:33.558]All of this lot. Bernie,
Podemos, Five Star.
[00:31:36.327]Who's on the other side of this?
[00:31:39.998]The winners in the
most perverse sense.
[00:31:42.200]Can't pay, won't pay,
to hell with you.
[00:31:44.802]That's your Trump voters.
[00:31:46.237]That's your Le Pen voters.
[00:31:48.740]It's also the left of
wars. It's just expressed
[00:31:50.942]in a different way.
[00:31:52.910]People who've seen this
system systematically not work
[00:31:55.013]for them and what
do you get there?
[00:31:57.181]That's when it's coated
[00:31:58.916]and clothed against immigrant,
[00:32:00.551]AfD, the Finns, Fidez,
Law and Justice,
[00:32:02.520]all the right wing versions.
[00:32:04.489]Back to that one slide.
[00:32:07.759]Same thing producing both.
[00:32:09.260]Now, in closing a deeper dive
into the German elections.
[00:32:13.264]For a while it seemed it
was all going so well.
[00:32:18.336]We'd got rid of the populists.
[00:32:20.104]Europe was growing.
[00:32:21.472]I mean I love, what
politician in their right mind
[00:32:24.108]gets that picture
taken and doesn't think
[00:32:26.644]James Bond bad guy?
[00:32:29.881]Right? It's just perfect.
[00:32:31.349]And Maureen's on the
other side they were like
door is over there.
[00:32:35.086]You know just go away please.
[00:32:36.788]So anyway, they got turfed
so it was like it was good.
[00:32:40.358]It was all fine. People in
Brussels are very happy, right?
[00:32:42.727]And then this happened.
[00:32:44.595]The economy was going well.
[00:32:47.131]So obviously people were going
to vote in their interest.
[00:32:50.034]We don't have to worry
about the German elections.
[00:32:52.103]It's fine. Look. Here's our
GDP. It's going up. Finally.
[00:32:54.906]You notice they always
put forecast in there
[00:32:56.541]in small print.
[00:32:58.343]And then here's unemployment
going down. Forecast, right?
[00:33:01.012]But things are moving
in the right way.
[00:33:02.547]Just in the same way
that the Democrats simply
[00:33:05.116]didn't get it. That when they
were wandering around America
[00:33:07.652]in the campaign, telling
everyone that things
[00:33:10.288]have never been so good.
[00:33:11.589]That unemployment's back to
where it was before the crisis.
[00:33:14.359]That things are great.
[00:33:16.427]For millions of
Americans that were like
[00:33:18.463]are you got rocks in your head?
[00:33:20.431]Have you been to where I live?
[00:33:22.433]All you need to do is,
I'm live in Providence,
[00:33:24.602]Rhode Island. Really,
really wealthy little part
[00:33:27.338]where the university
is the east side.
[00:33:28.906]I just need to drive two miles
[00:33:30.875]and I can take my
students to places where
[00:33:33.044]there are pawn shops, some
of the major businesses
[00:33:37.348]are mobile shops that there's
networks these students
[00:33:41.219]have never heard of. Two
completely different Americas.
[00:33:43.888]All in the one city. You
can bike from one side
[00:33:45.990]to the other.
[00:33:47.692]And yet, we think in
averages. On average, wages
[00:33:50.528]have gone up. On average
unemployment's gone down.
[00:33:53.698]We don't live on an
average. It's all skewed.
[00:33:56.100]It's all going to the top 20.
[00:33:58.636]Now, they thought in
Europe it was over.
[00:34:00.671]Everything was heading
in the right direction.
[00:34:03.007]And then this
happened. We're back.
[00:34:05.042]So what you've got the
black at the top there
[00:34:07.512]is Merkel's party the
coalition on the right.
[00:34:10.114]33% is the worst they've
done in recorded history.
[00:34:14.851]The SPD, the helper
up from the left,
[00:34:17.922]the people who are meant
to offer an alternative
[00:34:20.658]but have been end of coalition
basically pushing this
[00:34:23.127]agenda along, they're down
the worst result ever.
[00:34:25.897]Have a look at the winners
and losers on this one.
[00:34:29.434]It's the two mainstream
parties that have lost.
[00:34:32.103]Who's up on the other side?
[00:34:33.905]It's the alternatives. In
this case it's the right ones.
[00:34:37.041]Now here's the two faces
of the German economy.
[00:34:40.210]This is this whole story
about everything's fine.
[00:34:41.978]Why is everyone whining about
it? It's not the economics.
[00:34:43.648]So, here's real GDP per
capita average growth rate
[00:34:47.485]seven to 16, Germany
[00:34:50.487]They sell BMWs to the
rest of the world.
[00:34:52.723]They're awesome. We buy them.
It's that simple, right?
[00:34:57.495]Going down and down. This
is 2016 - 17, down from 4.3
[00:35:01.599]we'd kill for 4.3. We've got
4.3 but the way we calculate
[00:35:05.503]unemployment is really weird.
[00:35:07.104]And then they're down
now to basically 3.7.
[00:35:09.707]They've got over
[00:35:11.075]They have a shortage
of skilled workers.
[00:35:13.644]So why is everyone
complaining? Well, here's why.
[00:35:16.113]This is poverty and development.
[00:35:18.583]Have a look at that purple
line. That's the poverty rate.
[00:35:21.285]Now this came from two sources.
[00:35:24.222]Number one buying East
Germany. Basically 17 million
[00:35:27.692]unemployed communists showed
up and said get me a job.
[00:35:30.027]You had to integrate
them in your economy.
[00:35:33.097]That costs a lot of money. And
the land of the eastern land
[00:35:35.900]of the ones where you still
have the highest number of
[00:35:38.369]people in poverty on
social benefits, et cetera.
[00:35:42.206]Now for the past ten years
the German government
[00:35:44.208]like everyone else
has been saying
[00:35:45.610]we need to tighten our belts.
[00:35:46.777]We need to pay back our debt.
[00:35:48.179]We need to cut back
this welfare state.
[00:35:49.680]We can't afford it anymore.
[00:35:51.782]But at the same time,
what are they doing?
[00:35:53.150]They're opening their door
to two million refugees.
[00:35:56.721]So what does that look
like to the people who are
[00:35:58.022]the recipients sitting
in the east who have seen
[00:36:00.324]their industry stripped,
their country destroyed
[00:36:03.961]and their homes devalued?
[00:36:05.963]While the rest of the
west is doing fine
[00:36:08.165]and now they're meant to
accept a bunch of immigrants.
[00:36:10.167]There seem to go all
the welfare transfers.
[00:36:12.503]How come I can't get
my school renovated?
[00:36:15.406]You can see how
this one plays out.
[00:36:19.944]This is the election results
in east and west Berlin.
[00:36:22.380]This is one city that
used to be divided.
[00:36:25.683]20 years ago the
division is still there.
[00:36:28.953]What you see in the
west, Merkel's party 34%
[00:36:32.189]in the east 27%.
[00:36:33.491]AfD, the right wing upstarts
the anti-immigration party
[00:36:37.929]west Berlin 10.9. 21.6.
That's in one city.
[00:36:46.938]Identity politics do
matter but all identity is
[00:36:50.241]coded through economics.
You can't explain a rise
[00:36:53.477]in the number of racists by
virtue of a rise of the number
[00:36:55.546]of racists. You need to
explain where it comes from.
[00:36:57.248]And where it comes from
in the German elections
[00:36:59.584]which I think is very,
very germane for thinking
[00:37:01.752]about this problem in
general is what is it unique
[00:37:04.322]about this one area? Why is
it that if you're in the east
[00:37:06.757]you're far more likely
to have a higher level
[00:37:10.094]of xenophobia than the west
[00:37:11.362]even when you control for age.
[00:37:13.965]Well part of the fact is
go back to the prior slide.
[00:37:16.300]You live in the area
[00:37:18.202]You live in the area that
since 1991 has been under a
[00:37:21.238]sea of transfers and now you
feel you're in competition
[00:37:24.241]for those transfers
with a bunch of people
[00:37:26.243]that have come into your
country that you didn't invite.
[00:37:28.913]Do you think populists
can pick up on this?
[00:37:31.515]And make this into a politics?
[00:37:33.451]And if the center parties
are unable to talk about it
[00:37:36.053]unable to explain rationally
why they should want
[00:37:38.823]to make these choices, then
the results inevitable.
[00:37:41.792]And the tragedy
in the German case
[00:37:43.394]and this argument could be
extended here and everywhere
[00:37:45.630]is the following.
[00:37:47.131]The west is old.
The west is rich.
[00:37:51.402]But you didn't have enough kids.
[00:37:53.604]There are 1.4 new Germans
for every two that are there
[00:37:56.173]just now. Their
[00:37:58.309]The whole of Europe is
just below two in its
[00:38:02.413]So that means one of
two things. Either,
[00:38:04.749]if an economy is nothing more
than a number of workers,
[00:38:06.350]number of hours worked
and the amount of capital
[00:38:08.452]if you take out the
number of workers
[00:38:10.121]you have a shrinking pie.
[00:38:11.656]Given that the pie is already
skewed in its distribution
[00:38:13.624]that's gonna get ugly.
[00:38:15.826]So the solution
would be immigrants.
[00:38:17.962]Because they can come in,
you can put their kids
[00:38:20.564]in your system. You can tax
them across the generations.
[00:38:23.734]They pay for your debts.
They pay for your old care.
[00:38:26.537]They pay for your pensions.
[00:38:28.372]Or you can do the
stupidest thing ever.
[00:38:30.107]You can say no to that and
demand that you want more.
[00:38:34.979]Which seems to be
what people are doing.
[00:38:38.382]Here's an interesting one.
[00:38:40.217]This is contact with immigrants.
[00:38:42.219]People in the west have far
more contact with immigrants
[00:38:45.756]than people in the east.
[00:38:47.425]But in the east is where
they voted for the AfD.
[00:38:49.894]So how do you explain that?
[00:38:52.263]'Cause it's not even
contact with real people.
[00:38:54.432]It's the imaginary that these
people are taking things
[00:38:58.569]That's a pure populist creation.
[00:39:02.440]So why do people vote against
those who work against
[00:39:04.575]their best interests?
[00:39:06.343]Well, it's not clear
to me that's the case.
clear that the populists
are really the problem.
[00:39:10.881]Even on the right.
Or even on the left.
[00:39:13.050]See this presumption that
we had that the mainstream
[00:39:15.286]parties were working for
them. And it turned out
[00:39:17.822]it wasn't true. I'll give
you a little bit of anec data
[00:39:20.624]from this and you
can check it out.
[00:39:22.793]In the Guardian newspaper
Tom Frank wrote about this,
[00:39:26.230]it's the most obvious
site to get a link to it.
[00:39:28.833]Here's the story. When they
did the Podesta email hacks
[00:39:32.303]when they got the
[00:39:34.939]somebody took the data
from wikileaks and decided
[00:39:37.374]to what's called geolocate
the data. In other words
[00:39:41.078]what were the place names
that the leading democrats
[00:39:43.848]who are the left party who are
meant to represent all of us
[00:39:46.951]remember, not the
[00:39:48.652]What were the place names
that they talked about?
[00:39:51.355]In their private communications
in this election.
[00:39:53.390]What was the number one
most frequently named place
[00:39:56.994]in their communications?
Can you guess?
[00:40:01.799]Have a guess.
[00:40:03.167](audience randomly answering)
[00:40:09.907]Number two east
and south Hampton.
[00:40:13.477]Then New York.
[00:40:15.446]Then San Francisco.
[00:40:17.815]Then I think it was LA and DC.
[00:40:20.184]And the rest of the country.
[00:40:22.419]Two standard deviations out.
[00:40:25.222]So what's the imaginary?
[00:40:27.691]Of a party that seeks
to represent all?
[00:40:30.194]If that's all the places
that they talk about
where the money is.
[00:40:33.664]And it's not just to
castigate the democrats.
[00:40:35.566]The British labor party
was like this under Blair.
[00:40:38.202]The German SPD under Schlueter has done this.
[00:40:39.703]The left has systematically
failed the people
[00:40:42.173]that it supposedly represents.
[00:40:44.308]So why should we be
at all least surprised
[00:40:45.843]that they defect and
then go to anyone at all
[00:40:49.180]that actually says hey,
I know that everyone's
[00:40:51.615]ignored you for 25 years.
I at least hear the fact
[00:40:54.418]that you're crying
and understand why.
[00:40:58.189]People's every day experience
is very different from a
[00:41:00.424]national average. Walking
out and telling people
[00:41:03.327]that the price of
iPods has fallen
[00:41:04.962]which means that really
they've got more money
[00:41:07.164]than they think at a time
when they can't afford
[00:41:09.099]to send their kids to college
[00:41:10.601]or their kids would be insane
to take on that much debt
[00:41:12.870]'cause it's like having
a house with no asset.
[00:41:14.271]It's just patronizing.
[00:41:18.142]And the example of immigration,
I'll go back to that one
[00:41:20.444]it's very different
depending on where you live.
[00:41:22.880]Immigration to me is
another person from another
who has a PhD.
[00:41:29.320]That's what it means
where I live, right?
[00:41:31.522]But that's 'cause
I'm in the top 20%.
[00:41:33.624]If you're living in
public housing in France
[00:41:36.160]and those resources
have been finite
[00:41:39.330]and those resources
have been cut,
[00:41:41.031]and you're the ones
that are confronted with
cultures, coming in
[00:41:44.835]not integrating with you,
taking the resources from you
[00:41:47.805]at least as you perceive
it, and that's what's been
[00:41:49.974]ignored by the national front,
[00:41:51.609]don't expect them not to make
endroads. Because it gels
[00:41:53.477]with everybody's common sense.
[00:41:56.413]Regardless of whether we
can say, well on average
[00:41:58.082]immigrants benefit the economy.
[00:42:00.284]No one lives in an average.
[00:42:03.020]Now the problem here,
and I'll close with this,
[00:42:04.355]is that you can identify
with all of that
[00:42:06.290]and I hope to understand
populism, people begin to
[00:42:08.559]accept that because it's
not joining one side
[00:42:11.028]or the other. To
understand the phenomenon,
[00:42:13.030]to defeat a phenomenon
you need to understand it.
[00:42:15.566]But it's the problem
is over here.
policies are trash.
[00:42:20.638]They can't work.
[00:42:22.606]The first one as I explained
with immigration and debt
[00:42:24.642]you need more immigrants
not less or you're gonna
[00:42:26.610]go bankrupt. Think
about this one.
[00:42:28.779]This country 80% of
all financial assets
[00:42:31.248]are held by baby boomers.
[00:42:33.817]80% of those assets are
held by 20% of baby boomers.
[00:42:38.355]They're gonna get liquidated
in the next 20 years
[00:42:39.990]because everybody dies.
[00:42:42.059]And when they do, it
will either be spent in
[00:42:44.295]the most inefficient
[00:42:45.729]running down those assets
until you qualify for Medicare
[00:42:49.099]which is just insane
[00:42:50.668]or it will lead to the
greatest non-work transfer of
[00:42:53.637]wealth in the history
of the republic.
[00:42:55.906]Whereby an entire
[00:42:58.008]a huge amount of cash
for doing nothing.
[00:43:00.344]That's not good.
wages. It's all a problem.
[00:43:06.050]But there's also
an upside to this.
[00:43:08.319]The only reason people are
actually able to eat just now
[00:43:10.387]is because of global
[00:43:12.323]If you want to
tear all that down,
[00:43:13.691]exactly where are you gonna
get not just your kiwi fruit
[00:43:15.426]from, your very basics.
[00:43:18.028]Given how complex the
interdependencies in the
[00:43:20.164]world economy are.
[00:43:21.865]So simply targeting
inwards, there's a country
[00:43:24.101]that tries this. It's
called North Korea.
[00:43:25.836]It's not very good.
[00:43:29.740]Globalization has certainly
harmed a lot of jobs.
[00:43:32.042]But not as much as you think.
[00:43:34.211]The main culprit
has been technology
[00:43:35.980]and also labor migration.
[00:43:37.715]What do I mean by that?
[00:43:39.450]Wisconsin lost one third
of its jobs not to Mexico
[00:43:42.386]but to Texas and Florida and
other right to work states
[00:43:46.256]back in the 1970's.
[00:43:48.058]We've been industrializing
for a very long period.
[00:43:53.497]for labor really efficiently.
Not so in services.
[00:43:55.699]Fastest largest volume growing
job in the United States,
[00:43:59.203]elder care nurse,
[00:44:01.638]and home help.
[00:44:03.340]'Cause that's where we need
it 'cause the baby boomers
[00:44:05.142]are getting older and
they need the help, right?
[00:44:07.111]But in manufacturing,
robots will take everything.
[00:44:10.881]But this has been
going on for 50 years
[00:44:12.383]so the notion that
this is NAFTA.
[00:44:13.617]NAFTA's a rounding
error on this.
[00:44:16.987]And if you try and
dismantle all that,
[00:44:19.289]all you do is piss
off the Canadians.
[00:44:21.325]Nobody wants to do that.
[00:44:24.895]They will deny us maple syrup.
[00:44:30.634]That's not worth it.
[00:44:32.569]And finally the last one,
I'll come back to this
[00:44:34.004]is aging. At the end of the
day we're an older society
[00:44:36.640]and an older society is
one that saves too much
[00:44:39.476]and invests too little.
Because when you're at the,
[00:44:41.879]to sound like an economist,
when you're at the end
[00:44:44.381]of the life cycle, you care
about present consumption.
[00:44:47.151]So you don't care about the
ability of somebody else
[00:44:49.453]who you don't know
to go to college.
[00:44:51.321]So you vote for tax cuts
because that's in your
[00:44:53.490]immediate interest 'cause
you want to leave it all
[00:44:54.958]to your kids.
[00:44:56.860]But the world your kids
are gonna grow up in
[00:44:58.395]is the one that everybody
else's kids are growing up in.
[00:45:00.631]And if 80% of them
think the system's bust
[00:45:02.599]and 66% of you here
think the system's bust
[00:45:06.637]by the voting I saw earlier,
[00:45:08.372]then it doesn't matter how
much you try and self insure
for your own kids.
[00:45:12.576]You're leaving them
a sh**ttier country.
[00:45:14.845]Don't do that.
[00:45:16.880]And the first step to
that, it's very simple.
[00:45:18.882]Go back to that graph.
[00:45:22.052]Imagine what would happen
if you had free college
[00:45:23.620]tuition. 60 billion
a year would do it.
[00:45:26.657]We spend more on DARPA in the
defense research institutes.
[00:45:31.128]Subsidized child care. Imagine
what it'd actually be like
[00:45:33.297]if women particularly single
mothers were actually able
[00:45:36.133]to be active members of the
workforce rather than being
[00:45:39.036]general stress cases as they
spend 60% of their take home
[00:45:42.573]pay getting their kids
looked after so they can put
[00:45:45.008]40% on the table to feed them.
[00:45:53.183]Every other country in
the world has managed
[00:45:55.552]to have a single payer
health care system.
[00:45:57.788]It's just more efficient.
[00:46:01.658]We spend 17% of
GDP on health care.
[00:46:04.728]Everybody else spends about
seven. 10% of American GDP
[00:46:08.098]is more money than I could
spend on a Victoria's Secret
[00:46:14.471]And that's a lot of money.
[00:46:15.772]Imagine what we
could do with that.
really would help.
[00:46:20.377]We have this obsession
with short termism.
share holder value.
[00:46:25.182]What that means is, I've
met tons of CEOs and
[00:46:27.718]they all say the same thing.
[00:46:29.153]I would love to
invest in communities.
[00:46:30.988]I would love to do
more long term R and D.
[00:46:33.223]I'd love to onshore
stuff, I really would.
[00:46:35.259]But I can't because if
somebody gets control of five
[00:46:37.961]percent of my shares,
usually some activist idiot
[00:46:40.297]from a hedge fund, then
they will come and replace
[00:46:42.666]the entire board because
they're not maximizing
[00:46:44.635]the share price.
[00:46:46.236]Well how about we change
[00:46:48.238]by changing the law
to stop that nonsense?
[00:46:50.307]And then you'll be more
like German corporations.
[00:46:52.242]And then we could make
the BMWs for a change.
[00:46:56.680]And finally the last one.
[00:46:59.917]Why is it okay for Facebook
and Google to know more
[00:47:01.785]than the CIA about who you are?
[00:47:05.255]And then to sell
that for profit?
[00:47:07.591]And Equifax that
have all your details
[00:47:10.561]and then lose it and go whoops.
[00:47:12.863]What's happening is
we're building these
[00:47:14.698]winner take all
[00:47:16.833]The margins on which
[00:47:20.003]Imagine you have a
60% profit margin
[00:47:21.905]because the cost of
providing your marginal costs
[00:47:23.907]your next good is zero which
is what these guys have.
[00:47:26.677]So what's their
incentive to invest?
[00:47:29.780]Well they could send
a rocket to the moon
[00:47:31.582]and we're doing deep mine,
yeah, whatever, great.
[00:47:34.318]But what's your actual
investment in communities?
[00:47:36.553]What's your investment in labor?
[00:47:37.888]We don't have to have one,
it's just scalable tech.
[00:47:41.024]So because of that your
costs are incredibly low,
[00:47:43.227]your returns are unbelievably
high. You're making money
[00:47:45.896]for just showing up and
because you're a monopolist
[00:47:47.698]huge barriers to entry,
nobody else gets to play.
[00:47:50.934]That's what we're
turning the economy into.
[00:47:53.070]So it's a Ron Teer's paradise.
[00:47:54.938]It doesn't work to work.
[00:47:57.608]It only pays to be
one of those guys.
[00:47:59.943]We can't all be
one of those guys.
[00:48:02.980]So a simple way to do
it is just follow that.
[00:48:04.948]Those five things. Just do that.
[00:48:06.383]And you'll kill
populism in a heartbeat.
[00:48:08.619]And if you don't, don't be
surprised if they're in charge.
[00:48:29.840]MIKE ZELLANY: Thank you very
much professor for your
[00:48:30.974]inspiring discussion and
proposed solutions at the end.
[00:48:34.411]At this time, Dr. Blyth
will take questions from the
[00:48:36.613]audience. Please submit
your questions on Twitter
[00:48:40.050]using the hashtag
E.N. Thompson Forum.
[00:48:42.486]You may also write
questions on notecards which
[00:48:44.154]are provided by the ushers.
[00:48:46.023]Our first question
this evening comes from
[00:48:47.791]the students, the E.N. Thompson
[00:48:52.896]Professor Blyth, do you
believe that American people
[00:48:55.098]voted against their
best interest due to a
[00:48:57.134]deteriorating trust for
the system? And if so,
[00:48:59.770]do you think the 2008
financial crisis could've been
I think it is begun long
before the financial crisis.
[00:49:06.810]The financial crisis
exacerbated what was going on
[00:49:09.012]but the generic collapse in
trust in public institutions
[00:49:12.616]has been a long time coming.
[00:49:14.618]And has many, many causes some
of which I've talked about
[00:49:17.020]there so. But I don't think
people vote against their
[00:49:19.623]best interest. I really
don't. I will defend the right
[00:49:23.226]of the most hardcore Trump
voter vote for Trump.
[00:49:28.031]Because at the end of the
day, your life experience
[00:49:30.067]says I really don't believe
a word that anybody else
[00:49:33.370]says and this guy may
be a horse s**t peddler
[00:49:35.172]but he speaks my
type of language.
[00:49:37.407]Right. I mean put it this
way, here's a way to think
[00:49:40.243]about this and
I'm quite serious.
[00:49:41.912]If you really think
someone's a liar,
[00:49:43.680]there is no point in putting
any investment in them.
[00:49:46.950]You will be disappointed.
If you think
[00:49:48.885]someone's a bulls**t artist,
there might be an upside.
[00:49:54.891]On the other hand if things
get worse, they finally get
[00:49:57.194]worse for the top 20%.
Welcome to my downside.
[00:50:02.532]Germans have a word for
this its schadenfreude.
[00:50:04.935](audience laughing and clapping)
[00:50:08.805]Nobody thinks that way. I
do. I'm evil in some sense.
[00:50:12.476]Anyway that's my sincere answer.
[00:50:14.845]MIKE: Mark, what do you think
about the free health care
[00:50:16.513]in the UK? Does it work
because of the country's size
[00:50:18.615]or another reason?
[00:50:20.984]BLYTH: You can do it on all
sorts of scales. It doesn't have
[00:50:23.053]to be one giant bureaucracy.
I mean the (inaudible)
[00:50:25.322]kind of out of control.
It's too hierarchical,
[00:50:28.792]it tries to serve the
entire nation. You can have
funded versions of this
[00:50:33.697]that share costs across things.
[00:50:35.499]My basic point is everybody
else's money should do this
[00:50:38.935]and they all spend less
than we do. Usually half.
[00:50:41.705]And health care outcomes.
Longevity, Japan kicks ass.
[00:50:45.776]Quality of life, less
stress. Spain tops the list.
[00:50:49.479]Not this weekend. Things are
kicking off. But usually right?
[00:50:52.916]There's lots of different
ways you can look at this.
[00:50:55.218]If you want sort of like
highly stressed out societies
[00:50:58.221]with lots of social
problems, we rock. Right?
[00:51:01.124]In part because we work too
many hours and because of that
[00:51:03.894]we're totally stressed so
we consume far too many
[00:51:06.263]pharmaceuticals, et cetera,
et cetera, et cetera.
[00:51:09.065]So it's not just the
question of the nature of the
[00:51:10.934]payer system. It's what do
you expect health care to do.
[00:51:14.538]And that's part of a larger
conversation maybe about
[00:51:16.807]what are we trying to do
because we are all just
[00:51:19.176]running to stay still.
Apart from a few of us
[00:51:21.878]who have managed to
basically take the cake.
[00:51:24.181]And really until we get
to the heart of that
[00:51:26.349]everything else is
skirting around the issue.
[00:51:29.119]MIKE: Thank you. We'll stay
in the United Kingdom.
[00:51:30.720]Why did the Brits
vote for Brexit?
[00:51:32.756]BLYTH: Because they're morons.
[00:51:36.426]MIKE: Next question.
[00:51:37.360]BLYTH: So, this is when
it becomes comedy.
[00:51:39.963]But it's also tragedy and the
best comedy is tragedy, right?
[00:51:43.967]So, here's the way
it worked before.
[00:51:46.470]The Brits had the thing
called the pound, right?
[00:51:49.239]It was cute. Had a picture
of Elizabeth on it, right?
[00:51:51.107]They were never going to
join the euro and because
[00:51:54.010]they were never going
to join the euro,
[00:51:55.512]they didn't have to put up
with any of the nonsense
[00:51:57.147]that the Germans and their
perpetual belt tightening.
[00:51:59.916]Any of that crap. They didn't
have to put up with all these
[00:52:02.352]rules called the Fiscal
Compact and the Deficit
[00:52:04.421]Reduction Procedure. They
were never going to join.
[00:52:07.457]And the best thing
about being a country
[00:52:09.059]is having your own money.
[00:52:10.994]'Cause if your banking
system goes poof, you can
[00:52:13.263]print money to save
it, if you want.
[00:52:15.665]You could also decide not to.
[00:52:18.001]You can take a hit
through the exchange rate
[00:52:20.270]because you have one so you
basically default slowly
[00:52:23.540]on foreigners in your cash
rather than on your own
[00:52:26.209]people. If you don't
have your own currency,
[00:52:28.645]if you give that up, you
can't do any of these tricks.
[00:52:31.314]And what that means is either
you let everything default,
[00:52:34.784]you blow up the banking
system for the whole of Europe
[00:52:37.487]which would be crazy
[00:52:39.122]or alternatively you squeeze
[00:52:41.892]Welcome to Greece, right?
[00:52:43.793]Why is Greece in such
a circ, that's why.
[00:52:45.128]They don't have their own money.
[00:52:47.163]Now, the Brits are smart
enough to go, we're never
[00:52:48.698]giving this up. We're
one of the big three,
[00:52:50.667]we get to like tell the
Germans and the French no
[00:52:53.203]we're not doing that,
no we're doing that.
[00:52:54.771]We get to veto
anything we don't like.
[00:52:56.406]We have our own massive
[00:52:58.875]which is really big and
earns us tons of money.
[00:53:01.711]We get to clear all
these euro transactions.
[00:53:03.813]We have this lovely
little hedge currency
[00:53:06.182]between the euro and the
dollar called the pound.
[00:53:08.585]It's deep and it's liquid.
Our property markets
[00:53:10.620]are the biggest money
laundering scheme on the planet.
[00:53:13.657]We have the best deal ever.
[00:53:17.594]David Cameron renegotiated
the best deal ever.
[00:53:20.196]And then decided
he didn't like it.
[00:53:22.866]Took it to the British
people and said
[00:53:24.200]what do you think of the EU?
[00:53:25.769]And they basically said, we
don't know but we hate you.
[00:53:30.874]'Cause it wasn't really
about the EU. It was about
[00:53:32.642](high pitched laser noise)
[00:53:33.677]to the elites basically
[00:53:35.211]and then the result
came in and they went
[00:53:37.047]oh crap. So they
handed it to May
[00:53:38.648]and now May has to
negotiate the best deal ever
[00:53:42.419]having defaulted on the
best deal ever twice.
[00:53:45.522]So, in my book they're morons.
[00:53:47.924]Now, is that fair? Yeah,
if you're gonna decide
[00:53:50.493]on something as complex
and important as the EU,
[00:53:53.563]have a debate about the EU.
Don't make up stuff about
[00:53:56.933]350 million a week for
the health care system
[00:54:00.470]if we don't pay
taxes to Brussels.
[00:54:02.639]You might as well
turn around and say
[00:54:03.840]well, Marc Blyth would
be seven foot tall
[00:54:05.342]if he didn't eat carrots.
[00:54:08.478]There's just as much
factual content in that one.
[00:54:11.014]But we've got this world
where that we're like
[00:54:13.083]you have to give both sides
of the debate an answer.
[00:54:15.585]All right. Over here we
have someone with facts
[00:54:17.220]and knowledge and data,
[00:54:18.688]and over here we have
a complete lunatic.
[00:54:20.590]Let's give them equal
time. That was basically
[00:54:21.925]the Brexit vote.
[00:54:25.996]MIKE: All right, let's take some
wrap up for our questions
[00:54:27.430]from our rapidly filling up
Twitter feed this evening.
[00:54:30.233]First, what happens when
there are no more jobs
[00:54:31.668]because robots have
taken them all?
[00:54:33.870]BLYTH: Robots can't take them
all for the simple reason
[00:54:35.505]that the fastest growing
jobs for the next
[00:54:37.440]20 years are gonna be
looking after baby boomers
[00:54:39.709]and they haven't
invented that robot yet.
[00:54:42.612]When we talk about robots,
once you get out of
[00:54:45.115]manufacturing which is
[00:54:47.484]because you can efficiently
add robotic processes,
[00:54:50.020]what you're really talking
about is things called
[00:54:51.921]algorithmic processes, right?
[00:54:53.823]Can machines learn to do
things and if they can,
[00:54:56.226]can those tasks be
routinized in such a way
[00:54:59.129]that they can do them much
faster and much more
[00:55:02.666]This is where you're taking
jobs. Now where do you taking
[00:55:04.768]jobs? Number one,
the financial sector.
[00:55:06.836]Why? Because they've
lent all this money
[00:55:09.539]and we're not borrowing anymore
[00:55:11.107]'cause our wages
aren't going up.
[00:55:12.575]So the only way they're
gonna maintain their margins
[00:55:14.244]is if they cut their
costs. So what do they do?
the whole back office.
[00:55:19.482]It's called Fintech.
Financial technology, right?
[00:55:22.519]They're the jobs that are
actually more vulnerable to this
[00:55:24.688]than anything else.
Manufacturing is going the way
[00:55:27.023]of 19th century manufacturing.
It has been replaced
[00:55:31.494]by something better and
smarter. What bothers me is
[00:55:34.297]what happens when you have
concentration of retardants
[00:55:37.100]to assets. It's not
about the robots.
[00:55:39.736]It's about who controls
the retardants the robots.
[00:55:42.105]'Cause if a handful of
monopolistic digital firms
[00:55:44.274]actually control these
technologies, they're just gonna
[00:55:47.343]basically extract rents
from the rest of society
[00:55:50.213]and pay us whatever
they see fit.
[00:55:52.682]That's when it becomes
[00:55:54.718]But it's not about
[00:55:57.053]That's not the one
to worry about.
[00:55:58.755]The second thing, I must say
this as well, it's actually
[00:56:01.124]very important. Every
time that there's been
[00:56:03.326]a technological revolution,
there's been a net increase
[00:56:06.162]in the size of the labor
market not a decrease.
[00:56:07.897]So why should this
time be different?
[00:56:10.567]Well because it's digital,
it's different, it's gonna
[00:56:12.702]happen so fast, blah blah blah.
[00:56:16.306]Very high taxed and transfer
society, welfare state,
[00:56:18.808]big state, the whole lot, right?
[00:56:20.610]Number two in the
world for startups.
[00:56:22.579]Very technologically advanced.
Five percent of their
year were cash.
[00:56:27.183]Everything else is digital.
[00:56:28.518]They are already
a digital society.
[00:56:30.687]They still got employment.
[00:56:33.223]Let's have a little faith here.
[00:56:34.724]We remember the jobs
that are being lost
[00:56:36.426]we are unable to picture
the jobs that will be there.
[00:56:39.262]I still have faith
that that's the case.
[00:56:40.864]MIKE: Considering how it has
destroyed some economies
[00:56:44.367]do you think debt
has a place in them?
[00:56:46.669]BLYTH: Well remember debt's
not a bad thing unless
[00:56:48.505]you speak German.
[00:56:51.941]Sprechen sie Deutsch?
[00:56:55.345]What is the word for debt?
[00:56:59.482]Which is the same word as guilt.
[00:57:02.585]I'm not making this up.
[00:57:04.387]I wish I were.
[00:57:05.989]Any Italians here?
[00:57:08.925]Anybody speak Italian?
[00:57:10.827]Catholics? Any Catholics here?
[00:57:12.262]Half the town's Catholic.
What's the middle of the mass
[00:57:15.498]called where you
profess your faith?
[00:57:18.468]The credo. Comes from the
Italian and Latin credere.
[00:57:25.341]See a bunch of people
who think debt is guilt.
[00:57:27.977]And you've got another
bunch of people
[00:57:29.445]who think debt is credit.
[00:57:32.048]What's the secondary meaning
of credit in English?
[00:57:37.487]What's the credo? The
profession of faith.
[00:57:40.924]The whole thing's based
on faith. You just believe
[00:57:42.725]you're gonna get
paid back. That's it.
[00:57:44.928]Now, you can have an attitude
to that that like debt
[00:57:47.397]is an obligation that
must be paid back.
[00:57:49.399]Or you can say no, the reason
you get paid an interest rate
[00:57:51.734]is 'cause you're taking a risk.
[00:57:53.303]Here's the risk. You
might not get paid back.
[00:57:55.605]It's not a moral obligation.
[00:57:57.407]So debt is the
opposite of credit.
[00:57:59.275]Assets are the opposite
[00:58:00.777]There's nothing wrong with debt.
[00:58:03.079]It's a question of who's
been asked to bear it.
[00:58:04.948]And if you're asking
people to take on debt
[00:58:07.517]that you know they can't
pay back, you're a predator.
[00:58:17.894]MIKE: Based on your
[00:58:20.363]are there any US politicians
who can get elected?
[00:58:23.433]BLYTH: I think
so. I do. And he'll be
too old to do it himself
[00:58:26.903]but I'm a big
believer in Bernie.
[00:58:31.541]The reason being
[00:58:33.509]apparently he's not the
nicest guy. I don't know
[00:58:35.345]but he seems very
avuncular, who knows, right?
[00:58:38.348]But that's irrelevant. Who
cares about personality
[00:58:40.216]it's what you're saying,
what are you putting on the
[00:58:42.185]platform? What are you
actually telling us?
[00:58:43.720]And he's actually pointing
out good God, if we could
[00:58:46.456]save ten percent of GDP,
you wouldn't need to have
[00:58:49.692]1.2 trillion in student
loan debt weighing
[00:58:51.628]down the next generation.
[00:58:53.563]So basically save it in
health care, you can just wipe
[00:58:55.665]out the student loan problem.
[00:58:57.300]This is simple accounting.
Why are we giving guaranteed
[00:59:00.503]interest rate repayments
to commercial banks
[00:59:04.440]to give you students loans
which you can't default on
[00:59:08.244]'cause you're not allowed
to? That's called usury.
[00:59:14.884]It's not a debt if you
can't default on it.
[00:59:17.787]It's not a moral obligation
to go back to the earlier one
[00:59:20.423]so I think that he's
on the right track.
[00:59:22.659]Now somebody else is
gonna take this on.
[00:59:24.093]I think that the world
changes in cycles just like
[00:59:26.329]these regimes but I'll
give you an example
[00:59:28.398]just now in Britain.
May is dead.
[00:59:30.533]The conservative party's
dead. Their message is dead.
[00:59:33.036]There's a guy you've
heard of Jeremy Corbyn.
[00:59:34.437]Jeremy Corbyn's the
leader of the labor party.
[00:59:37.440]He basically bought
out the labor party
[00:59:39.242]as a kind of completely
unfunded leverage buyout
[00:59:42.278]of a dead institution
and he walked in and said
[00:59:45.315]let's actually talk
about things that make
[00:59:47.116]a difference in the
lives or ordinary people
[00:59:49.152]and everyone said, you
outdated 1980's socialist,
[00:59:51.788]go away. So he's
[00:59:55.558]and he's made to be a
moron, whatever, fine.
[00:59:57.493]There's a brilliant
book about the 1970's by
[01:00:00.630]Perlstein called The
[01:00:03.433]Has anybody ever read it?
[01:00:05.234]No? I highly recommend
it. Big book.
[01:00:07.370]The 70's were bonkers. The
young people have no idea
[01:00:11.107]how mental it was. And
it's a book about the 70's
[01:00:13.977]but it's also a book
about Ronald Reagan.
[01:00:16.079]And in 1969 he was on
the board of regents
[01:00:18.648]of University of California
Berkeley and he was
[01:00:20.850]going on about free speech
and the oppression of speech
[01:00:24.420]amongst right wing students
and he was giving a damn
[01:00:27.090]about religious rights
and he didn't think
[01:00:29.325]the government should
be in our affairs
[01:00:31.294]and all this stuff
Reagan stood for.
[01:00:33.363]And this was the summer of love.
[01:00:36.065]Never had someone
been so long and wrong
[01:00:38.534]in a historical moment.
He was a laughing stock.
[01:00:42.872]By the end of that
decade the entire world
[01:00:44.941]had come to him. He
hadn't changed at all.
[01:00:48.144]Everything else had
moved and joined up.
[01:00:50.747]I think we're undergoing
a similar transition.
[01:00:52.982]I think that the money
doctors saved the regime
[01:00:55.084]that was born in 78
and died in 2008.
[01:00:58.855]They pumped it along on
monetary life support
[01:01:01.357]but it ultimately is
[01:01:04.494]intellectually and morally.
[01:01:06.396]And I think particularly the
young generations see this.
[01:01:08.531]The recent British
election where had it run
[01:01:10.700]for another few days,
Corbyn would have won
[01:01:12.602]despite the fact that
every pundit was producing
projection saying landslide
[01:01:18.608]for the conservatives.
[01:01:20.710]And also, you can think
about Trump's victory
[01:01:22.779]the same way. People
have had enough.
[01:01:25.581]And one way or another
they're gonna vote for change.
[01:01:28.317]I think there are positive
and progressive forces
[01:01:30.720]out there and that all we
need to do is bide our time.
[01:01:34.023]'Cause that moment of
change is coming again
[01:01:35.758]where the people who are
laughed at will be the ones
[01:01:37.794]where the world comes to them.
[01:01:40.730]MIKE: Mark, why did the word
China not appear in your talk?
Because they paid me not to.
[01:01:48.871]I'm a paid agent of the
Chinese communist party.
[01:01:50.940]Well it depends
how you handle it.
[01:01:52.942]Here's my shtick on
China. They're back.
[01:01:56.679]If you ever get a chance
to go to Shanghai,
[01:01:59.749]go to the Shanghai
Museum of Urban Planning.
[01:02:03.586]I think they call it that
to make sure you don't go.
[01:02:07.723]But when you go and
it's kind of a car park.
[01:02:09.659]It's like a square Guggenheim's
so rather than being
[01:02:11.861]round right with
paintings, it's square.
[01:02:14.764]And you go in and the first
one, it's all calligraphy,
[01:02:17.333]and there's a big piece
of Chinese writing
[01:02:19.502]and it says something
like, 3800 BC dig a ditch.
[01:02:24.140]And you go along like a few feet
[01:02:25.908]and there's another
big bit of calligraphy
[01:02:27.343]and the translation
at the bottom
[01:02:28.411]and while you're at
it, clean up the trash.
[01:02:30.213]And then you go along,
it's another 100 years
[01:02:31.681]and it says, and
while you're at it,
[01:02:33.516]get that rowdy lot from the
downstairs and put them in jail.
[01:02:36.319]And you go along and it says
[01:02:37.553]and then put in street lights.
[01:02:38.788]And then by the time you
go up and there's light
[01:02:40.723]by the time that my
people are running around
[01:02:42.458]painting themselves blue
and eating each other.
[01:02:44.494]They're like, oh we need
to figure out a public
[01:02:47.497]We're gonna allot this much
of the budget for doing this
[01:02:49.999]blah blah blah and it's like
this is year zero for us.
[01:02:53.302]The beginning of the
age of Christ, right?
[01:02:55.738]So what you do is you walk
up and you go holy crap.
[01:02:59.275]These guys have been
around for a long time.
[01:03:02.912]And what you're also
getting is a message
[01:03:04.380]this is the Chinese
state. This is what we do.
[01:03:08.117]Don't get in the way.
[01:03:10.686]So you get up to where
they get to the opium wars
[01:03:12.522]and the complete
breakdown of China
[01:03:14.157]which I believe if
memory serves me right
[01:03:16.392]they call the
[01:03:18.895]or something an
anadem like this.
[01:03:20.530]It takes up like half a wall.
[01:03:23.132]Then there's Mao. You'd think
that would be a big thing.
[01:03:25.902]Seriously he gets one panel.
[01:03:28.237]And then you open a door,
you ever seen the film
[01:03:32.241]They have a scale model of
Shanghai and they've got
[01:03:35.077]guys on wires coming down
putting the buildings in.
[01:03:37.813]Hi. We're back.
[01:03:41.250]Now, why are they doing this?
[01:03:42.585]It's a show of the
power of the state.
[01:03:44.921]And that's the way that works.
[01:03:46.489]That's the way
their economy works.
[01:03:47.690]They're not top down communists.
[01:03:49.358]Don't think that for a minute.
[01:03:50.493]They're the most fiscally
[01:03:52.828]in the world. 80% of
their public expenditure
[01:03:55.131]is spent at the local level.
[01:03:56.999]Like when we talk about
giving back to the states
[01:04:00.036]the republicans' master
plan would be half of
[01:04:03.406]what China has already achieved.
[01:04:05.341]Because they've got
1.2 billion people.
[01:04:08.110]So they have regions which
have a hundred million
[01:04:10.580]people in them. You can
do a lot of experiments.
[01:04:14.617]You can get things wrong
and still get things right.
[01:04:17.019]They are very robust the shocks.
[01:04:19.355]Now we don't let them buy stuff.
[01:04:20.856]We have a thing called
the national security
[01:04:23.326]foreign investment act of
2007 they can't buy guns,
[01:04:25.528]can't buy tech,
can't buy pharma,
[01:04:27.797](mouth fart noise)
[01:04:28.931]go away. So we sell them
stuff. They sell it through
[01:04:31.200]a Walmart, they get dollars,
[01:04:33.069]we make them buy treasury bills.
[01:04:35.071]They're fed up doing
that. They're not stupid.
[01:04:36.439]So they've got this project
called one belt one road.
[01:04:39.408]If we're not allowing
them to buy assets here,
[01:04:42.245]they will go form
[01:04:44.313]They're investing 40
billion dollars in ports
[01:04:47.216]in Pakistan. They've
already built a railway
[01:04:50.219]that stretches right
[01:04:52.688]You can bet that those nice
compliant governments of
and the rest of them
[01:04:56.525]will make sure that
nobody ever buys anything
[01:04:58.961]near that railway line.
[01:05:00.963]You'll bet that that
railway line will be moving
[01:05:02.665]freight trains at
300 miles an hour
[01:05:04.800]while we're still
dealing with a seller.
[01:05:07.970]And on those freight trains
will be all the goods
[01:05:09.639]that Europe can
possibly wanna consume.
[01:05:12.508]They'll just bypass us.
[01:05:14.877]Now, you can either
engage with that.
[01:05:16.545]You can get into a
stupid fight with that
[01:05:18.781]over some islands which
is utterly pointless
[01:05:21.317]'cause at the end of the day
neighborhood not yours
[01:05:24.987]and more to the point,
unless you're willing
[01:05:26.689]to actually invade them,
occupy them, and kill them
[01:05:30.760]We've been doing a lot of
that, it's usually working out
[01:05:35.364]So, they're just gonna
bypass us and do their thing.
[01:05:37.433]You can either engage with
that and sort our own house
[01:05:39.735]out. As the most powerful
country in the world,
[01:05:42.471]as the richest
country in the world
[01:05:44.073]we still got so much we can do.
[01:05:46.509]Or we can retreat inward
and worry about China
[01:05:49.245]as a threat and say that
we can't have health care
[01:05:51.714]and we can't do this,
we can't do that
[01:05:53.616]while all the profit's go
to a tiny handful of people
[01:05:56.319]who are telling
us all that stuff.
[01:05:59.088]I don't wanna do that.
[01:06:07.096]MIKE: Do you believe there is a
tech bubble or entrepreneurial
[01:06:09.532]facade that promotes a false
sense and lack of genuine
[01:06:14.603]BLYTH: Oh my god, yes. Absolutely.
[01:06:15.805]Was it called Juicerove?
Anybody hear about this one?
[01:06:19.208]Or Juicera or one of these
things? You know about this one?
[01:06:21.911]So millions of dollars
of silicon valley money
[01:06:25.815]into this wonderful
thing we're buying.
[01:06:27.883]You know those green juices
you get usually at airports
[01:06:30.519]and you drink them 'cause
you're about get on a plane
[01:06:32.321]and you don't want to die but
nobody actually likes them?
[01:06:36.425]So imagine you could
make this at home.
[01:06:38.494]Well I can, I can put s**t in
a blender and press go, right?
[01:06:41.263]No, no, no. To get
the real nutrients out
[01:06:44.400]what you need is a press
which has like the power
[01:06:47.336]of seven planets
[01:06:50.573]and so basically you
buy this bag of fruit.
[01:06:53.576]And you put it in this
big press and it goes
[01:06:56.278]and all this juice comes
out and it's amazing.
[01:06:57.980]So millions and millions
and millions of dollars
[01:07:00.015]into a technology
which we already have
[01:07:01.751]called a fruit press but anyway.
[01:07:04.620]It's fancy, right?
[01:07:06.055]So they put this out and
some guys at the Wall Street
[01:07:07.990]Journal got one of
these things and went
[01:07:09.725]I don't believe for a minute
it says that it's like
[01:07:11.794]the power of three
suns or whatever it is.
[01:07:13.896]So they put it on and
they squeezed the juice
[01:07:16.065]and they got the juice bag
and one of them held it
[01:07:18.200]and the other one squeezed it.
[01:07:19.802]And they got more
juice out squeezing it.
[01:07:23.372]This actually happened.
[01:07:24.640]End of company.
[01:07:27.276]So all this sort of
like unicorn stuff
[01:07:28.878]that's out there
that people refer to,
[01:07:30.546]this is a status competition.
[01:07:33.549]There was an economist at
the turn of the century
Veblen, he wrote
[01:07:37.019]The Theory of the Ledger Class
[01:07:38.788]and it really applies to
today as much as it did then
[01:07:41.323]when the Vanderbilts and
all that were around.
[01:07:43.392]It's about showing off that
you're part of the community.
[01:07:46.429]That you're another
silicon valley entrepreneur
[01:07:48.964]with your finger on the pulse,
[01:07:50.733]investing in the
latest thing. Why?
[01:07:52.802]Because that's what your
buddy does and you're all
[01:07:54.503]in the same club together
[01:07:55.905]and you're now all 50 and
you're buying blood from
[01:07:58.207]third world children and
giving your self infusions
[01:07:59.909]so you can live forever.
That s**t goes on.
[01:08:04.447]So I've heard.
[01:08:05.481]But anyways, it's a
[01:08:08.517]Does it really matter
if you lose the money?
[01:08:10.119]No. Because you've got so much.
[01:08:12.988]So, when you talk about being
on the technological frontier,
[01:08:17.059]When you do the next big
innovation, it's not another
[01:08:19.295]app on my phone that
I'm not gonna use.
[01:08:22.564]I'll give Elon Musk his due.
[01:08:24.332]He's somebody who
genuinely impresses me.
[01:08:26.268]If you can honestly
go to Puerto Rico
[01:08:28.304]and rebuild their grid
and do it with renewables,
[01:08:31.372]give the man the job. Fantastic.
[01:08:38.881]But if it turns out
you're basically somebody
[01:08:40.582]who's using this as an
excuse to bail out a bankrupt
[01:08:43.051]solar company, shame on you.
[01:08:47.356]MIKE: How or why do you think
race and immigrations
[01:08:49.457]becomes the lightning rod
for populist anger?
[01:08:51.727]Is it simply a
[01:08:54.229]BLYTH: I think it's more than
that. I think it's easy
[01:08:55.865]to mobilize against it
because it's a definite other.
[01:08:59.969]So, the United States,
the classic one
[01:09:01.804]and I've lived here 27 years
but it's just continued
[01:09:05.608]to fascinate me. I've lived
in Baltimore an incredibly
[01:09:07.776]divided city. I've lived in
Providence which typically
[01:09:12.548]an undivided, mainly
because there aren't any
[01:09:14.750]African Americans, really.
[01:09:16.185]The main ones are
Portuguese and Italians
[01:09:17.653]and that's sort
of less divisive.
[01:09:19.787]So there's incredible
division in this country
[01:09:21.756]particularly legacy of
slavery et cetera, et cetera.
[01:09:24.326]And yet this is the number
one country for immigration.
[01:09:27.363]And yet lots of other
immigrants come across
[01:09:29.365]from all over the world
and this city itself
[01:09:31.433]is a big migration
center for refugees.
[01:09:35.770]So on the one hand
you've got that
[01:09:37.506]and the other hand
you have this.
[01:09:39.108]Now every country has
a version of this.
[01:09:40.910]It may not be as deep as
the one in the United States
[01:09:43.045]and the trauma of
slavery but for example
[01:09:45.381]in France you've got the
trauma of colonialism.
[01:09:47.116]So then you have the
withdraw from North Africa,
[01:09:49.718]the legacy of what
they call the Pied-Noir
[01:09:51.787]the ones who had to come back
and liquidate everything there
[01:09:54.390]and come back to France.
[01:09:55.624]Now they're being
followed in by the Arabs
[01:09:57.359]that they'd left
behind. They're the ones
[01:09:59.094]who are taking the houses
from the working classes
[01:10:00.596]in the public housing.
[01:10:03.098]So it depends on where
you are in the country.
[01:10:05.734]What the legacy is? How
does that get interpreted.
[01:10:08.070]If you're in an area
where you have zero
[01:10:09.972]contact with immigrants,
as I showed you the
[01:10:13.409]east German slides, you can
still be more anti-immigrant
[01:10:16.045]than people who have
contact with immigrants.
[01:10:18.314]So it's how this is a product
of historical narrative,
[01:10:21.283]a product of
[01:10:23.419]and a product of the
deep political culture
[01:10:25.588]of these countries.
But the bottom line is
[01:10:27.423]economics is always expressed
in a cultural frame.
[01:10:30.593]Only in our models do
we imagine something
[01:10:33.162]called a representative
agent that runs through life
[01:10:35.664]jumping and adjusting to shocks
[01:10:38.000]and maximizing their utility.
[01:10:39.902]That's not what real people do.
[01:10:41.804]Real people have stories
and they live their lives
[01:10:44.173]through those stories
[01:10:45.541]and sometimes those
stories are colored
[01:10:46.842]by very ugly things.
[01:10:48.877]And that's just part of
life that we have to accept
[01:10:51.380]and try to improve upon.
what should baby boomers
be doing with their assets?
[01:10:56.585]BLYTH: Giving them away.
[01:10:59.455]MIKE: Last question
ladies and gentleman.
[01:11:01.924]Thanks very much Mark.
[01:11:03.859]what role, this is from our
Twitter feed this evening,
[01:11:06.929]what role does the study of
leadership play in how we
[01:11:09.498]balance government, society,
education, and give others
[01:11:12.401]a fighting chance?
[01:11:15.337]BLYTH: So, leadership is way
more, as I get older
[01:11:18.207]I realize that leadership
is way more important
[01:11:19.908]than I thought it was
when I was younger.
[01:11:22.211]Because you know,
leaders are annoying.
[01:11:24.313]It's like the person who
wants to be class captain.
[01:11:26.548]Nobody really likes them.
You have an election
[01:11:30.252]'cause you have to.
[01:11:32.921]it gives them something to do.
Washington D.C., right.
[01:11:36.959]So they all end up there.
[01:11:39.261]And there's a way in
which when you're younger
[01:11:44.400]Then as you get older and
you start to be in charge
[01:11:45.734]of things and run things,
you recognize the massive
leadership can make.
[01:11:51.006]That somebody with an
actual clear version
[01:11:52.741]who can gain the trust
of the people around 'em
[01:11:55.277]can take something that
seems utterly bankrupt
[01:11:57.913]and transform it and how
somebody who's a s**tty leader
[01:12:00.783]who thinks they're good
[01:12:02.217]can do incredible damage.
[01:12:05.254]So it's actually
[01:12:07.756]But when it comes to
the big scale questions,
[01:12:10.225]the big government questions
[01:12:11.894]I think it's actually
[01:12:14.863]So one of the students
in a earlier chat
[01:12:16.999]gave me a question and it
prompted the following response.
[01:12:21.036]I think the election
of Trump has been good
[01:12:21.870]for climate change.
[01:12:25.140]Because it stops the rest
of the world waiting around
[01:12:27.176]for America to
solve the problem.
[01:12:31.714]So if the Germans and the
Chinese now get together
[01:12:33.615]and do green tech
bring it to scale
[01:12:36.585]China for example has
installed more solar in the
[01:12:39.154]past three years than
the United States has.
[01:12:41.757]If they end up doing
that, we're the suckers
[01:12:43.992]because we should've been
leading the investment.
[01:12:45.894]We'll be buying it from them.
[01:12:47.963]But in a way, that
forces them to do that
[01:12:49.798]and that's good in a
global sense, go for it.
[01:12:51.600]So does that mean Trump was
a good leader in that regard?
[01:12:55.237]Well that's a different
[01:12:58.707]But it can have a
[01:13:00.109]Let's not sum it all
up to the one leader,
[01:13:03.178]the genius, the charisma,
whatever that does everything.
[01:13:05.347]That's not a good way
of thinking about it.
[01:13:06.949]They can make a difference.
But the key thing is
[01:13:09.284]when they've actually got
the trust of everybody
[01:13:11.386]who wants them to lead, that's
when societies work better.
[01:13:16.225]But when you have
leaders who are divisive,
[01:13:18.427]who pit people
against each other,
[01:13:19.728]that never works
out for anybody.
[01:13:22.131]That's the type of
populism you want to avoid.
[01:13:25.534]MIKE: All right. Ladies and
gentlemen. Two things.
[01:13:28.604]First I'd like to remind
you to mark your calendars
[01:13:30.005]for the next E.N. Thompson
forum. It will feature the
[01:13:31.807]British National Debate
Team as they tackle
[01:13:34.643]the question is
regulation of social media
[01:13:36.779]necessary to protect democracy?
[01:13:39.081]It's November 11th at 7 PM
here at the Lied Center.
[01:13:42.818]Secondly, join me in
thanking Dr. Mark Blyth.
[01:13:46.021]BLYTH: Thank you all for coming.
[01:13:47.055](audience clapping continues)
[01:13:55.264]Oh shush, shush.
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